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I ran into Ricardo Dos Santos and his amazing Qualcomm Venture Fest a few years ago and was astonished with its breath and depth. From that day on, when I got asked about which corporate innovation program had the best process for idea selection, I started my list with Qualcomm.

This is part 2 of Ricardo’s “post mortem” of the life and death of Qualcomm’s corporate entrepreneurship program. Part 1 outlining the program is here. Read it first.

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What Qualcomm corporate innovation challenges remained?
Ironically, our very success in creating radically new product and business ideas ran headlong into cultural and structural issues as well as our entrenched R&D driven innovation model:

Cultural Issues: Managers approved their employees sign-up for the bootcamp, but became concerned with the open-ended decision timelines that followed for most of the radical ideas. Employees had a different concern – they simply wanted more clarity on how to continue to be involved, since formal rules of engagement ended with the bootcamp.

Structural Issues: Most of the radical ideas coming out of the 3-month bootcamp possessed a high hypotheses-to-facts ratio. When the teams exited the bootcamp, however, it was unclear which existing business unit should evaluate them. Since there weren’t corporate resource for further evaluation, (one of our programs’ constraints was not to create new permanent infrastructures for implementation,) we had no choice but to assign the idea to a business unit and ask them to perform due diligence the best they could. (By definition, before they had a chance to fully buy into the idea and the team).

With hindsight we should have had “proof of concepts” tested in a corporate center (think ‘pop-up incubator’) where they would do extensive Customer Discovery. We should had done this before assigning the teams to a particular business unit (or had the ability to create a new business unit, or spin the team out of the company).

The last year of the program, we tried to solve this problem by requiring that the top 20 teams first seek a business unit sponsor before being admitted into the bootcamp (and we raised a $5 million fund from the BUs earmarked for initial implementation ($250K/team.) Ironically this drew criticism from some execs fearing we might have missed the more radical, out-of-the box ideas!

Entrenched Innovation Model Issues: Qualcomm’s existing innovation model – wireless products were created in the R&D lab and then handed over to existing business units for commercialization – was wildly successful in the existing wireless and mobile space. Venture Fest was not integral to their success. Venture Fest was about proposing new ventures, sometimes outside the wireless realm, by stressing newbusiness models, design and open innovation thinking, not proposing new R&D projects.These non-technical ideas ran counter to the company’s existing R&D, lab-to-market model that built on top of our internally generated intellectual property. The result was that we couldn’t find internal homes for what would have been great projects or spinouts. (Eventually Qualcomm did create a corporate incubator to handle projects beyond the scope of traditional R&D, yet too early to hand-off to existing business unit).

We were asking the company’s R&D leads, the de-facto innovation leaders, who had an existing R&D process that served the company extremely well, to adopt our odd-ball projects. Doing so meant they would have to take risks for IP acquisition and customer/market risks outside their experience or comfort zone. So when we asked them to embrace these new product ideas, we ran into a wall of (justified) skepticism. Therefore a major error in setting up our corporate innovation program was our lack of understanding how disruptive it would be to the current innovation model and to the executives who ran the R&D Labs.

What could have been done differently?
We had relative success flowing a good portion of ideas from the bootcamp into the business and R&D units for full adoption, partial implementation or strategic learning purposes, but it was a turbulent affair. With hindsight, there were four strategic errors and several tactical ones:

1) We should have recruited high level executive champions for the program (besides the CEO). They could have helped us anticipate and solve organizational challenges and agree on how we planned to manage the risks.

3) We unknowingly set up an organizational conflict on day one. We were prematurely pushing some of the teams in the business units. The ‘elephant in the room’ was that the Venture Fest program didn’t fit smoothly with the BU’s readiness for dealing with unexpected ‘bottoms up’ innovation, in a quarterly- centric, execution environment.

4) Our largest customer should have been the R&D units, but the reality was that we never sold them that the company could benefit by exploring multiple innovation models to reduce the risks of disruption – we had taken this for granted and met resistance we were unprepared to handle.

Qualcomm Lessons Learned

The Venture Fest program truly was ground breaking. Yet we never told anyone outside the company about it. We should have been sharing what we built with the leading business press, highlighting the vision and support of the program’s originator, the CEO.

We should have asked for a broader innovation time off and incentive policy for employees, managers, and executives. Entrepreneurial employees must have clear opportunities to continue to own ideas through any stage of funding – that’s the major incentive they seek. Managers and execs should be incentivized for accommodating employee involvement and funding valuable experiments.

We needed a for a Proof of Concept center. Radical ideas seldom had an obvious home immediately following the bootcamp. We lacked a formal center that could help facilitate further experiments before determining an implementation path. A Proof of Concept center, which is not the same as a full-fledged incubator, would also be responsible to develop a companywide core competence in business model and open innovation design and a VC-like, staged-risk funding decision criteria for new market opportunities.

It’s hard to get ideas outside of a company’s current business model get traction (given that the projects have to get buy-in from operating execs) – encouraging spin-offs is a tactic worth considering to keep the ideas flowing.

EpilogueThe program became large enough that it came time to choose between expanding the program or making it more technology focused and closely tied tocorporate R&D. In the end my time in the sun eventually ran out.

I had the greatest learning experience of my life running Qualcomm’s corporate entrepreneurship program and met amazingly brave and gracious employees with whom I’ve made a lifetime connection. I earnestly believe that large corporations should emulate Lean Startups (Business model design, Customer Development and Agile Engineering.) I am now eager to share and discuss the insights with other practitioners of innovation – I can be reached at ricardo_dossantos@alum.mit.edu

Lessons Learned

We now have the tools to build successful corporate entrepreneurship programs.

However, they need to match a top-level (board, CEO, exec staff) agreement on strategy and structure.

If I were starting a corporate innovation program today, I’d use the Lean LaunchPad classes as the starting framework.

Developing a program to generate new ideas is the easy part. It gets really tough when these projects are launched and have to fight for survival against current corporate business models.

10 Responses

Steve/Ricardo: I have heard (and lived) this story many times before in my relationships with innovation teams, both inside large corporations and more recently as entrepreneur seeking support and strategic partners for my startup’s technology in a B to B licensing play. These “lessons learned” come up repeatedly, and fully comport with what Christensen relates in “The Innovators Solution.” So, I have a good sense of what companies do not do it right, but what I am looking for is companies that ARE doing it right. I am also well connected in the Open Innovation community, and even this highly network group can’t provide much insight.

As a licensing-based startup, I crave knowledge of who my customer is and what they will pay for, which requires me to understand the corporate policies/politics/people who can put the kibosh on externally developed disruptive innovation in the battery charging space. While I don’t think this is more challenging than customer discovery in general, it does add a wrinkle that needs to be ironed out before my team can validate our business model.

And, yes, Lean works in business too. However, unless there is a stripped down, independent group supported at the highest levels of the organization that cannot be killed for budget reasons AND that is not perceived as “not invented here” by the product people, I don’t think we will see much success in this regard. I would love to be proven wrong, however.

I really like this post, particularly because this is one of the first times on your blog I’ve seen multiple womentrepreneurs highlighted in one place! I want to request a bit more of this trend please. You could start even further back than undergraduates by highlighting some entrepreneurial skill taught to girls, for example the 5 skills taught through selling Girl Scout Cookies: http://www.girlscouts.org/program/gs_cookies/the_five_skills.asp National Girl Scout Cookie Day is coming up on Feb 8th and I’m sure GSUSA would love to write a guest post for you. (Disclaimer: I don’t work for them, but I was a Scout and attribute a lot of my formative entrepreneurial experiences to my GS Gold Award. You can really thank them for the fact that I found and bought your book.)

Great post. Someone ought to do a case study on GM’s Saturn adventure. At GM the CEO said go outside the company and do everything differently — technology, culture, customer relations, process, … The employees who committed to Saturn succeeded in doing everything they were told to do. We all know the outcome.

Getting higher ups to green light a new direction or offering is one of the few hurdles you should want to take on. By getting their approval, you have to research things and learn more about it than you would have just to convince yourself. It may be an investment that isn’t coming out of your pocket so they always want figures and projections to justify the money. It’s hard because it’s always worth it on the good opportunities.

[…] to write this by a great post-mortem of Qualcomm’s now dismantled Venture Fest program on Steve Blank’s website, written by a fellow MIT alum Ricardo dos Santos, whom I think I would enjoy meeting someday. […]

Great post, Ricardo. While our experiences are different (I launched new businesses inside companies for twelve years, you ran an innovation group to help people like me), I think the similar outcomes are as inevitable as the Innovator’s Dilemma. Your post inspired me to write a more extensive response (http://wahanegi.com/why-intrapreneurship-will-never-work/); I’ve included an excerpt below.

“…Intrapreneurship will never work for five reasons:

The Strategy Mismatch – Entrepreneurs want to create new businesses, and companies want to expand and improve themselves. That sounds like a nice fit. However…
The Budgeting Mismatch – In the early stages entrepreneurs cannot deliver revenue, so they are working to command the very expensive resources of the company in a budgeting process that is for them…
The Rationality Mismatch – While in many circles it is fun to bash the seeming stupidity and irrationality of corporations, in my experience the anecdotes of ‘irrational’ and ‘political’ corporate behavior are often better seen as the exceptions that prove the rule…
The Irrationality Mismatch – I also do not know why the myth of a rational ‘homo economicus’ persists in the face of vast scientific research, most notably that of Nobel Prize winner Daniel Kahneman, but we should put it in the dustbin of business history. Individuals are not rational, especially when making big decisions, and even within the vast sea of human irrationality, Kahneman singles out entrepreneurs as an especially irrational group…
The Outcome Mismatch – The founder’s curse, when a company outgrows the entrepreneur, is a triple-curse inside of a corporation…

In my opinion, any one of these five mismatches is enough to doom corporate entrepreneurship initiatives no matter how lean. Together they stack up high enough to blot out the attempts of corporate PR teams to cast their companies as trendy hotbeds of entrepreneurship, if not in the moment then always in the course of time. The parable of The Giant and The Thousand Pixies (see the full post for an explanation) is inevitable, woven into the fabric of business, much like the Innovator’s Dilemma.

Lean principles can be used by corporations to improve existing products and business processes. Running lots of small experiments, connecting with customers, investing after success and all the other principles are business gold. But the principles should be applied not to intrapreneurship in the sense of building new ventures, but to management in the sense of increasing alignment with customer needs, stewarding resources and growing revenue.

Beyond that, I believe corporations should not be lean innovators, they should be giant innovators. They should focus on the type of innovation that ONLY they can do, not the type that everyone knows they do poorly. The type that requires eyes that can see over mountains and arms that can lift them. Innovation that involves deep R&D and vast infrastructure aimed at problems that are already well understood but whose solutions demand huge scale sets up big bet opportunities to benefit the corporations at a similarly massive scale, and is the best way to use their cash to benefit society. Of course it will not always work and many will fail, just as entrepreneurs fail, and corporations run by the entrepreneurs that founded them (e.g. Jobs’ Apple, Bezos’ Amazon, Zuckerberg’s Facebook, Page and Brin’s Google) are probably best able to make the decisions to take such risks. But they should not mistake the skills of the lean pixies for their own – a thousand striding giants can do much more than move mountains.”

What happens now with all those great product ideas? Is Qualcomm going to fund any projects using outside investors? Perhaps some of the products could be developed outside the company now that the entrepreneurial spark has been lit in some of the employees.

It’s hard, but I disagree that it’s not possible to make such an innovation work inside a corporation (or other large organization). I’m proud that we’ve been making it work… and going steady now heading into our 17th year….

Some key differences that may have helped us in my view:
– Our set up includes space and resources precisely to do real experiments to make major tangible and visible progress in reducing the hypothesis to data ratio BEFORE having to sell something to a business unit. [Note we have since successful created a sister incubator called PathFinder to be the “business unit” for things that don’t fit any current business unit.]
– Every day, not event Ii.e. boot camp) driven. There is not an event or stage where a bunch of people all get tied up at once. I think this not only matches the real cycle of innovation, but makes it more tolerant as ‘background noise’ to the organization. Having such a thing makes it an easier target.

That said, I absolutely support the potential of the Lean Launch methods as a supplemental improvement to our process…. something we’re looking into.

Overall, make no mistake. In my view, corporate innovation done right is not about everlasting bliss and happiness, but getting comfortable with a constant state of irritation.

I believe it is difficult for large-companies to manufacture entrepreneurs. Part of the thrill of making a new company is the struggle to generate enough cash and outside investment to succeed. While Qualcomm offers a great opportunity to avoid the initial struggle, I think that struggle helps make the business more successful in the long run.

If a corporate intrapreneurship program is going to have a chance to succeed, it must not isolate the entrepreneurs from the very valuable struggles that are crucial to shaping her success. Learning that tension is a good thing is indeed very hard for a corporation.